Am. Dental Ass'n v. Cigna Corp., 09-12033.

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Writing for the Court: DUBINA
• Citation: 605 F.3d 1283
• Parties: AMERICAN DENTAL ASSOCIATION, in an associational capacity on behalf of its members, John Milgram, DDS, Scott A. Trapp, DDS, individually and on behalf of all other similarly situated, Byron C. Desbordes, Plaintiffs-Appellants,v.CIGNA CORPORATION, Connecticut General Life Insurance Company, Cigna Dental Health, Inc., Metlife, Inc., Metropolitan Life Insurance Company, Mutual of Omaha Insurance Company, Defendants-Appellees.
• Docket Number: No. 09-12033.,09-12033.
• Decision Date: 14 May 2010

605 F.3d 1283

AMERICAN DENTAL ASSOCIATION, in an associational capacity on behalf of its members, John Milgram, DDS, Scott A. Trapp, DDS, individually and on behalf of all other similarly situated, Byron C. Desbordes, Plaintiffs-Appellants,
v.
CIGNA CORPORATION, Connecticut General Life Insurance Company, Cigna Dental Health, Inc., Metlife, Inc., Metropolitan Life Insurance Company, Mutual of Omaha Insurance Company, Defendants-Appellees.

No. 09-12033.

United States Court of Appeals,
Eleventh Circuit.

May 14, 2010.

605 F.3d 1284

COPYRIGHT MATERIAL OMITTED

605 F.3d 1285

Robert J. Axelrod, Pomerantz, Haudek, Block, Grossman & Gross, LLP, New York City, G. Robert Blakey, Notre Dame Law Sch., Notre Dame, IN, for Plaintiffs-Appellants.

Jamie Zysk Isani, Thomas R. Julin, Hunton & Williams, Joshua Douglas Poyer, Craig P. Kalil, Aballi, Milne, Kalil & Escagedo, P.A., Miami, FL, James L. Griffith, Akin, Gump, Strauss, Hauer & Feld, LLP, Philadelphia, PA, for Defendants-Appellees.

605 F.3d 1286

Appeal from the United States District Court for the Southern District of Florida.
Before DUBINA, Chief Judge, FAY, Circuit Judge, and ALBRITTON, ^* District Judge.

DUBINA, Chief Judge:

The question presented in this appeal is whether, under Fed.R.Civ.P. 9(b) and the pleading standard recently articulated by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), Plaintiffs/Appellants (“Plaintiffs”) have sufficiently pled factual allegations in their RICO complaint to survive a motion to dismiss. After reviewing the briefs and record and having the benefit of oral argument, we affirm the district court order dismissing the complaint.

I. BACKGROUND

Plaintiffs are three dentists practicing in Illinois, Nebraska, and Maryland. The American Dental Association (“ADA”), a non-profit dental association headquartered in Chicago, also asserts representational standing on behalf of its members. The defendants/appellees are dental insurance companies: Cigna Corporation, Connecticut General Life Insurance Company, Cigna Dental Health, Inc., MetLife Inc., and Metropolitan Life Insurance Company (“Defendants”). Plaintiffs contracted with Defendants to provide dental services to Defendants' members through dental service managed care plans. Plaintiffs now assert violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968 (2006), as well as state law claims for breach of contract and tortious interference with contractual relations and existing and prospective business expectations. More specifically, Plaintiffs allege, on behalf of themselves and a putative class of similarly-situated dentists, that Defendants “engaged in a systematic, fraudulent scheme to diminish payments to Class Plaintiffs through automatic downcoding, Current Dental Terminology (‘CDT’) code manipulation and improper bundling.”¹ D.E. 111, at ¶ 3.

Plaintiffs filed this purported class action lawsuit in the Southern District of Florida in May 2003. The case was originally assigned to Judge Adalberto Jordan.

605 F.3d 1287

Defendants moved to dismiss the RICO and state law claims in the original complaint. On March 30, 2005, Judge Jordan dismissed all of the RICO allegations without prejudice on the ground that Plaintiffs' RICO enterprise allegations were deficient. Plaintiffs filed their first amended complaint on April 18, 2005. On June 30, 2005, while Defendants' motion to dismiss the first amended complaint was pending, Judge Jordan transferred the case to Judge Frederico Moreno as a case related to the In re Managed Care Litigation Multi-District Litigation (“ Managed Care MDL”), 00-MD-1334, an MDL that has been ongoing in the Southern District of Florida since 2000. ² On November 28, 2005, Judge Moreno designated the case as a tag-along action within the Managed Care MDL and closed it for statistical purposes.

In February 2008, Judge Moreno denied all pending motions in the case with leave to re-file, and requested status reports. During the roughly two-year lull in activity in this case, the United States Supreme Court decided Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although the district court had not ruled on the motion to dismiss the first amended complaint, Plaintiffs sought and received Defendants' consent to file a motion seeking leave to file a second amended complaint.

On May 1, 2008, Plaintiffs filed their Second Amended Complaint, which is at issue in this appeal. The complaint contains six counts. Counts I-IV are federal RICO and RICO-related claims: RICO conspiracy under 18 U.S.C. § 1962(d) (Count I), a claim for aiding and abetting RICO violations under 18 U.S.C. § 2 (Count II), a substantive RICO claim under 18 U.S.C. § 1962(c) (Count III), and a claim for declaratory relief under 18 U.S.C. § 1964(a) and 28 U.S.C. § 2201 for RICO violations (Count IV). Counts V and VI are state law claims for breach of contract and tortious interference with contractual relations and with existing and prospective business expectancies, respectively.

On June 6, 2008, Defendants moved to dismiss Counts I-IV and VI of the Second Amended Complaint. They did not move to dismiss the breach of contract claim (Count V). After briefing, on February 11, 2009, the district court issued a written order granting the motion to dismiss without prejudice. The court held that all four RICO claims were deficiently alleged. Citing Twombly, the court held that Plaintiffs' substantive RICO allegations “fail to set forth a violation of § 1962(c) that is ‘plausible on its face’ because they do not raise a right to relief ‘above [the] speculative level.’ ” In re Managed Care Litig., No. 03-21266-CIV, 2009 WL 347795, at *4 (S.D.Fla. Feb. 11, 2009) (quoting Twombly, 550 U.S. at 555, 570, 127 S.Ct. at 1965, 1974). The court also found the conspiracy claim lacking because the Second Amended Complaint did “not contain sufficient factual allegations about the Defendants

605 F.3d 1288

agreeing with other entities and/or persons to engage in the ongoing criminal conduct of an enterprise.” Id. The court held that the remaining RICO claims were deficient for similar reasons.

The district court, however, gave Plaintiffs a chance to file another amended complaint by February 26, 2009. It directed Plaintiffs to “conform with the pleading requirements announced in Twombly and applied by this Court in Solomon and Genord,” id. at *7, which are two cases also involved in the Managed Care MDL. See Solomon v. Blue Cross & Blue Shield Ass'n, 574 F.Supp.2d 1288 (S.D.Fla.2008) (dismissing complaint for failure to state a claim under Twombly); Genord v. Blue Cross & Blue Shield of Mich., No. 07-21688-CIV, 2008 WL 5070149 (S.D.Fla. Nov. 24, 2008) (same). The court warned that similar failure to comply with the new pleading standard would result in dismissal with prejudice. In re Managed Care Litig., 2009 WL 347795, at *8.

On February 23, 2009, Plaintiffs sought an extension of time to file a third amended complaint. On February 24, 2009, the district court denied that motion, stating:

Given the history of this particular case and the consistent insufficiencies of the Plaintiffs' allegations, the Court would likely have had sufficient justification to dismiss Counts I-IV and VI of the Second Amended Complaint with prejudice. Because the plaintiffs are operating under newer, more stringent pleading requirements, the Court decided to afford them one last bite at the proverbial apple .... At this point, the factual averments necessary to satisfy Twombly are either readily included in yet another amended complaint, or simply do not exist.

D.E. 143, at 2. Plaintiffs never filed a third amended complaint. On March 2, 2009, the district court dismissed Counts I-IV and VI with prejudice. The district court entered a final order on March 23, 2009, declining to exercise supplemental jurisdiction over Count V and dismissing the case in its entirety. Plaintiffs now appeal the dismissal of the RICO and RICO-related claims in their complaint.II. STANDARD OF REVIEW

“We review de novo the district court's grant of a motion to dismiss under Rule 12(b)(6) for failure to state a claim, accepting the allegations in the complaint as true and construing them in the light most favorable to the plaintiff.” Mills v. Foremost Ins. Co., 511 F.3d 1300, 1303 (11th Cir.2008) (quoting Castro v. Sec'y of Homeland Sec., 472 F.3d 1334, 1336 (11th Cir.2006)).

III. DISCUSSION A. Twombly and Iqbal

Because the present case reflects the concerns that motivated the Supreme Court to adopt a new pleading standard in Twombly and Iqbal, a brief discussion of those decisions is warranted.

Fed.R.Civ.P. 8(a)(2) requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957). In Twombly, the Supreme Court expressly “retired” the “no set of facts” pleading standard under Rule 8(a)(2) that the Court had previously established in Conley v. Gibson. Twombly, 550 U.S. at 563, 127 S.Ct. at 1969. Justice Black wrote for the Court in Conley of “the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”

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355 U.S. at 45-46, 78 S.Ct. at 102. In rejecting that language, the Court in Twombly noted that courts had read the rule so narrowly and literally that “a wholly conclusory statement of claim would survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some set of undisclosed facts to...